What is Alternative Business Lending?
Alternative lenders are the alternative to bank lending. In the lending industry, alternative lending companies are at the forefront of providing businesses with flexible finance options when banks can't meet their financing needs. These forms of alternative business lending include a variety of options, such as small business loans (term loans), equipment financing leasing, asset-based lending, invoice factoring, and merchant cash advances, to name a few.
As a leading alternative business financing company, AdvancePoint Capital has assisted companies of all sizes and in most industries to obtain the financing their enterprise requires to prosper by offering one or more of these financing options. Noble Funding, Fora Financial, and Rapid Finance are among the lending company leaders that help businesses realize their potential through alternative financing methods. Being part of the fintech revolution, we’re in the game of turning the seemingly impossible into the possible. Alternative lenders typically offer a wide range of alternative lending options that businesses can take advantage of to acquire working capital, including equipment financing leasing for essential machinery or tech upgrades.
Advancepoint Capital has a marketplace of many alternative business lenders that can fit specifically into your current working capital needs, offering the agility to evolve with market demands.
Alternative Business Lending vs. Traditional Business Lending
As many business owners have experienced, getting traditional bank loans (term loans) from traditional lenders such as a bank or credit unions for small businesses is a challenge. Credit union lending, as a component of the traditional lending landscape, presents particular advantages such as potentially lower interest rates and a more community-oriented lending approach. The stringent requirements for credit scores, extensive financial histories, and loan collateral often create a formidable barrier. In contrast, alternative business lenders provide an array of lending products that cater to the unique needs of small businesses with typically easier qualification requirements. Compared to credit union lending, these products range from equipment financing, where the equipment itself serves as collateral, to invoice financing backed by unpaid invoices, and may even involve borrowing against credit card sales, offer more flexible solutions than those typically offered by banks or credit unions.
However, it's worth noting that while credit union lending typically involves more personalized service and can lead to strong, long-term financial partnerships, the accessibility of alternative lending can lead to a cycle of borrowing as businesses may be tempted to renew loans due to easiness in roll-over options provided by these alternative lenders. Borrowing in this manner should be managed carefully to prevent a reliance on debt that can hinder the ability to save and invest. With these relaxed criteria, alternative lending products can be a lifeline for businesses looking to grow or manage cash flow, even if they come with higher interest rates, since the interest only accrues on the outstanding balance. This allows business owners to repay and reuse their credit line during the draw period, which can be especially helpful for stabilizing cash flow.
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Features and Benefits of Alternative Business Financing
- A Variety of business financing products
- Application process that is fast and simple compared to a bank
- Reduced documentation requirements
- Considers a variety of qualifications whether it's credit and/or documentation limitations
- Low annual revenue requirements
- Many alternative lenders in the network
How Does Alternative Business Lending Work?
Business loan originators such as business loan brokers and online lenders have a variety of alternative s to your traditional business loan or line of credit.
Financing a small business venture is often easier said than done. The red tape that must be negotiated with a traditional lender before funding is approved often feels insurmountable. Even an established business has to jump through hurdles for funding approval from business lenders that can delay the start of a new project.
The reality is that we live in a world where time is of the utmost essence. Information is more than readily available and the race is on like never before for true innovation. You simply don’t have the time to be sitting around waiting for finance to come through while your competition soars ahead of the flock.
It is the aim of alternative lenders for small businesses to remove the stopping blocks to entrepreneurial flow by bringing funding options and businesses into alignment with one another. What’s more, we do it in a way that doesn’t discriminate, welcoming applications from small businesses with a range of credit histories.
Alternative Business Financing Options
We have put together the most popular alternatives to traditional business loans that can cater to a variety of business owners qualifications and needs.
Small Business Loans
Small Business loans, essential components in the spectrum of small business financing solutions, are predominantly sought after due to their favorable conditions. However, navigating the intricacies of loan eligibility requirements, such as a minimum 625 credit score, at least one year in business, and $100,000 in annual revenue, can be daunting as lending institutions closely examine these factors. To streamline this process and ensure quicker turnaround—sometimes as fast as one day—many alternative lenders leverage underwriting technology, thereby expediting approval times.
Business Line of Credit
While the lending application process for a small business loan is comprehensive, integrating the latest technology ensures that applicants gain access to these funds with terms manageable and possibly more favorable than other funding cons associated with alternate financing options. Here are the key details you need to consider:
- Term Length - 6 to 36 months
- Max Loan Amount - $500,000
- Interest Rates starting at 11% (although starting at 4% APR can be found with sources like Fundbox)
- Minimum Credit Score 580 (though requirements may vary, with some lenders asking for at least a 625 credit score)
Invoice Financing
Invoice factoring, also known as invoice financing, is a form of accounts receivable financing that enables businesses to manage their cash flow by utilizing the invoice value of their unpaid bills. Companies with net terms up to 60 days can receive an advance of up to 85% of the invoice value, which helps businesses improve their cash flow rate for a nominal fee. Interestingly, the invoice value, rather than the credit score of the business owner, plays a crucial role in determining eligibility for this type of financing.
- Invoice Net Terms- 15, 30, 45, 60, and up to 90 days
- Credit Limit - up to $10,000,000
- Factor rates starting at .05% up to 5%
- No Credit Requirement for Business Issuing Invoice
Merchant Cash Advance
Merchant cash advances are advance of money to the business that is repaid based on future sales of the business. Merchant cash advances can be a great option when traditional loan options are not available due to credit score or some other reason. Credit standards are lower because repayment is a set percentage of future sales until paid back in full.
Business Credit Cards
Yes, business credit cards are an alternative lending option. In fact it may be the most common alternative business loan product used by small businesses. Credit cards are a form of lines of credit that are revolving with flexible repayment and are great for quick purchases and business expenses.
- Revolving line of Credit
- Credit Limits up to $75,000
- Interest Rates - Into 0% up to 29.99 simple interest
- Minimum Credit Score 680
Equipment Financing
Some equipment can be very expensive for some businesses and equipment financing is a must because it provides longer terms with affordable payments as it uses the collateral of the equipment as security. Maintaining a solid cash reserve is essential for businesses to ensure they can manage payments smoothly without jeopardizing operational funds. Whether through equipment loans or equipment leasing, options are available with monthly payments designed to support your cash flow. These financing strategies enable businesses to keep a healthy cash reserve, which is critical for unexpected expenses or investment opportunities. With the objective of acquiring essential machinery and leasing it as an efficient alternative to purchase, businesses can maintain liquidity while staying current with the latest technology.
- Financing in the form of Loans and/or Leases
- Equipment Value up to $500,000
- Interest Rates starting at 11%
- All Credit Considered
Why do You Need an Alternative Business Loan?
In our experience, we have found that a common thread among most of our clients is their need to obtain business financing as quickly as possible. In our experience, we have found that a common thread among most of our clients is their need to obtain business financing as quickly as possible.
As a result, we have found they seek alternative lenders out for one of the following reasons:
- They do not qualify for business funding from traditional banks. Many small business owners find that their level of creditworthiness does not meet the stringent requirements set forth by traditional banks. This can be disheartening and stall the progression of a business from its conception to fruition. In such cases, these owners turn to us for more accommodating funding options tailored to fit the unique scenario of their venture.
- They need immediate cash flow. The time it takes for a bank to make a financing decision can be incongruent with a company’s urgent need for working capital. AdvancePoint Capital steps in to provide business alternative lending solutions in a timeframe that aligns with the swift pace at which your enterprise operates.
- They have bad credit. Although a poor personal credit score may hinder opportunities with conventional lenders, our approach is different. Our evaluation considers the holistic creditworthiness of applicants, catering to those with varying credit profiles, ensuring that even businesses with less-than-perfect credit histories can access funds for future growth.
Pros and cons of Alternative Business Lending: Is Alternative Business Lending Right for my Business?
Pro's
- Higher approval rates than traditional financing
- Streamlined application process
- Flexibility with more products and features
Con's
- Higher interest rates
- Repayment Terms can be shorter than traditional financing
- Placing debt on the business
- Increases expenses with debt payments
How to Acquire Alternative Business Financing Quickly?
The entire alternative financing process—from application to funding—can take less than one business day with alternative lenders. That means that in less time than it takes you to come up with loans application and required documents, you can expect an offer in hours. While banks require extensive paperwork and personal financial records to be submitted, online lenders have a simple online application process. Alternative lending only requires one page application form that is easy to fill out and submit, and there is no need for an in-person consultation.
All you need to provide alternative business lenders are:
- A simple one-page application document, to be accessed through our website
- Active business bank account-Business Bank Statements so that we can assess both the needs and viability of your business.
- Proof that you have been in business for a minimum of 6 months. (Please note that we do not accept startups.)
We need minimal paperwork, and you’ll have your alternative business financing decision within hours. If accepted, your money is immediately available and repayment terms are flexible. That means you can focus on the implementation of your next big idea, rather than worry where the next bout of alternative funding will come from. As a result, you can get in step with the needs of your business as soon as possible. We’ll serve you so that you can better serve your clients.
In return, we require that repayments are made over a period of 12 months or less. Interest rates are dependent on your gross sales.
What is an alternative lender?: Types of Lenders
An alternative lender is an entity that provides alternatives to traditional bank and credit union loans and lines of credit.
- Business Loan Broker
- Online Business Lender
- Market place or Loan Comparison Service
- Small Business Lenders
- Merchant Cash Advance Funders
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Frequently Asked Questions
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We got into the business of alternative financial services because we believe in the long term potential of small business owners to drive the economy, create jobs, and provide needed services. If we can work toward making that happen through convenient alternative loans, we will be able to make strides toward the kind of thriving economic environment that benefits all tiers of society.
If your bank or traditional lenders have not offered your business the financing options and timeline your enterprise requires, contact AdvancePoint Capital today for alternative lending solutions. We want to help you grow your business and will work hard to help you obtain the financing your company depends on. Just fill out and submit our form, or give us a call at (855) 635-3936. Our representatives are available 24/7 to assist you. Call today!
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